Company Perspectives:

Fleetwood Enterprises, Inc., a Fortune 500 company listed on the New York Stock Exchange, is the nation's leading producer of manufactured housing and recreational vehicles. Headquartered in Riverside, California, the company employs over 18,000 people in plants located in 18 states and Canada.
The dream of home ownership is alive and well in America, and Fleetwood made that dream a reality for more than 65,000 families in fiscal 1997. Fleetwood builds quality, factory-built homes, enabling families to enjoy comfortable housing at affordable prices.
Fleetwood manufactures a wide array of recreational vehicles, including motor homes, travel trailers, folding camping trailers, and slide-in truck campers. Fleetwood RVs are designed to make leisure-time activities more enjoyable and enhance today's more active lifestyles.

Company History:

Fleetwood Enterprises, Inc. is the nation's largest maker of both manufactured housing and recreational vehicles (including motor homes, travel trailers, folding trailers, and truck campers). Manufactured housing is sold under the corporate name, Fleetwood. The company's line of motor homes are sold under various brands, including Jamboree, Bounder, Flair, Pace Arrow, Southwind, Tioga, Storm, and Discovery. Fleetwood's travel trailers are marketed under the names Avion, Prowler, Terry, Wilderness, Mallard, Savanna, and Westport. The company's folding trailer division, acquired in December 1989, manufactures products under the Coleman name. As a whole, Fleetwood recreational vehicles span the full range of the market, with their retail prices ranging from $3,000 to more than $200,000. Both housing and recreational vehicles are marketed through a network of more than 2,600 dealers in the United States and Canada. The company supplies its dealers from production facilities located in 18 states and in Canada. Fleetwood holds a 49 percent stake in Expression Homes, a joint venture with Pulte Corp. created in October 1997 that operates retail centers selling manufactured houses as well as offering home financing and insurance. Other company operations include two fiberglass manufacturing companies and a lumber milling unit.

From Window Blinds to Mobile Homes in the 1950s

Fleetwood was founded by the company's current chairman and CEO John C. Crean in a greenhouse in southern California in 1950. Under the name Coach Specialties Company, he and his wife manufactured and sold a new and improved line of window blinds for travel trailers. At the same time, Crean built a travel trailer for his own use. One of his window blind customers, a trailer dealer, was so impressed by the trailer's construction that a deal was struck for Crean to assemble trailer units with materials supplied to him by the dealer. Production was to be in quantities large enough to make sure the dealer could keep pace with his seasonal orders. As the summer travel trailer season came to a close, Crean continued his new enterprise but opted to build mobile homes instead of trailers. Mobile homes, currently referred to as manufactured housing, provided a more stable market for growth because of increasing demand for inexpensive housing in southern California. The name Fleetwood was chosen from a line of automobiles. By 1954 the company had outgrown its greenhouse to become a thriving enterprise with three production plants.

The growth of the manufactured home market was caused by the product's moderate price. The cost of a quality manufactured home runs about one-third that of an on-site constructed home, in each case excluding land. Off-site production eliminates the use of many different contractors, construction is not affected by weather, and less time is required for construction because every component arrives at the assembly point ready to use. Manufactured homes are trucked in sections to the homesite, where they are assembled in a matter of days, instead of the normal on-site construction times that can stretch into weeks and months.

Expanded into RVs in the 1960s and 1970s

In 1957 the company changed its name from Coach Specialties Company and reincorporated as Fleetwood Enterprises, Inc. During the 1950s the manufactured housing industry had split into two distinct markets. Fleetwood had its feet firmly planted in the mobile home market, and because of its healthy growth had accumulated a large cash surplus. The other market, the recreational vehicle (RV) market, Crean saw offered good opportunities. In 1964 Fleetwood acquired Terry Coach Industries, Inc. and Terry Coach Manufacturing, Inc. This was a time when an ever-increasing number of U.S. outdoor enthusiasts wanted to travel. The company's line of travel trailers included sleeping, eating, and bathroom facilities. As the size and weight of these units grew, Fleetwood designed and built a line of fifth-wheel travel trailers, a model that is exclusively built to be towed by larger pickup trucks. As sales grew and the market expanded, the company continued to open new production plants to meet increasing sales. In 1965 Fleetwood became a public company. By 1990 the company operated 12 travel trailer plants in the United States and Canada.

As the RV market boomed, Fleetwood continued to diversify with the acquisition of Pace-Arrow, Inc., a motor home manufacturer. The acquisition was a logical extension of the company's travel trailer business. Motor homes are similar to travel trailers in construction and use. The interior looks the same as a travel trailer except that the motor home provides an area for the driver. The entire unit is constructed on a purchased truck chassis. The product line offers two types, both of which are self-contained. Type A motor homes are full-size units, with sleeping room for four to eight people and typically equipped with air conditioning, on-board power generators, and stereo systems. Type C units are smaller, built on cut-away van chassis, and usually accommodate fewer people. At a time when inexpensive gasoline and the U.S. public's wanderlust fueled the RV market, Fleetwood was marketing a diverse product line, the prices of which accommodated a wide range of buyers' budgets. The company rounded out its product line with the acquisition, for cash, of Avion Coach Corporation in 1976. Avion augmented the company's line of trailers with its expensive, luxury class models. In 1977 the company incorporated in the state of Delaware, keeping the same name.

The 1970s was a period of rapid growth and expansion for Fleetwood. As the decade ended, the revolution in Iran, sky-rocketing gasoline costs, and the buying public's fear of a recession, along with rising interest rates, created an across-the-board slump in sales. Two-thirds of Fleetwood's product line were vehicles that were intended for use on U.S. highways. Gasoline shortages, which in some states resulted in day-to-day rationing, along with the spiraling costs of fuel, shook the RV market to its foundations. Many manufacturers were forced out of business as RV retailers began closing their doors and defaulting on their bank-financed inventories. The ensuing recession brought with it escalating interest rates, making mortgages for all types of housing and for financing RVs prohibitive. The company, for the first time since the early 1950s, found itself in a situation calling for drastic cutbacks in production and staffing.

Encountered Various Troubles in the 1980s

The year 1980 was difficult for Fleetwood. It was forced to close nine of its production plants. The cutbacks closed three travel trailer plants, three motor home facilities, and three manufactured housing plants. Fleetwood had to consider massive worker layoffs.

Fleetwood was forced to take a hard look at its entire structure during these hard times. It developed a tightly focused management policy, employing regionalized management within its housing group, which permitted the company to react more quickly to market trends. Housing design and development was spread to five areas: West Coast, central, southeast, mid-Atlantic, and Florida. Each plant facility began operation as a separate profit center with day-to-day decisions made locally. Fleetwood slowly rode out the recession, and in 1982 Fleetwood's motor home division was projecting sales of 40,000 units in 1983.

The rapid growth and expansion Fleetwood had experienced in the 1980s had not been without legal and regulatory problems. The company is subject to provisions of the Housing and Community Development Act of 1974. These provisions, which are regulated by the U.S. Department of Housing and Urban Development (HUD), resulted in an action by the department against Fleetwood in 1985 claiming potential safety defects in 4,000 mobile homes made by the company during the years 1981 through 1984. Fleetwood was ordered to notify the owners of the mobile homes in question about possible defects in the units' walls, floors, and beams. The problems did prompt HUD to initiate an investigation into engineering techniques used by other mobile home manufacturers.

The four-year-old dispute came to a head in February 1988, resulting in a U.S. Justice Department complaint filed against Fleetwood in Wilmington, Delaware, seeking civil penalties in excess of $20 million. The complaint alleged the existence of certain standards violations in manufactured homes produced by several of Fleetwood's subsidiaries. On February 9, 1989, Fleetwood entered into a settlement agreement with HUD and the Justice Department. The settlement resulted in the dismissal of government charges against Fleetwood in exchange for a settlement payment.

Fleetwood, along with other companies in the manufactured housing industry, was the target of a class action suit filed in Delaware in 1985. The complaint alleged that veterans who had purchased mobile homes had paid excessive prices and finance charges as a result of illegal rebates that were falsely certified to the Veterans Administration by the manufacturers. In 1990 the court certified a class of plaintiffs consisting of certain veterans who purchased mobile homes from Fleetwood dating back as far as April 1981. Two of the company's subsidiaries pleaded guilty to six counts of filing false certifications in 1987, resulting in approximately $650,000 in fines and civil settlements.

Fleetwood Credit Corporation (FCC) was established in 1986. The finance company's objective was to become the major source of both wholesale and retail financing of Fleetwood's RV products on a nationwide basis. Using $25 million of its own funds, the company hired Robert B. Baker, former head of Nissan Motor Acceptance Corporation, to head the project. FCC began operations by servicing just 12 Orange County, California dealers. In the early 1990s the company had lending operations in southern and northern California, Oregon, Indiana, Massachusetts, Georgia, New Jersey, and Texas. Fleetwood Credit showed a net income of $2.9 million in 1990, a 56 percent increase over the previous year.

In 1989 Fleetwood acquired the Coleman Company's folding trailer business. The Coleman product line ranged in retail price from $2,000 to $10,000, and in 1989 it accounted for more than 30 percent of the folding trailer market. With the acquisition of this line, Fleetwood had products for most consumers' budgets. The company also introduced new lower-priced trailer models in response to changing market conditions.

Ups and Downs Marked the 1990s

The 1990s were an up-and-down period for Fleetwood as its results were affected by the economic downturn early in the decade, the mid-1990s recovery, and increasing competition in the later years of the decade. Following the difficult years of 1990 and 1991, revenues and operating income increased each year, although the growth rate for both slowed considerably by fiscal 1996 and 1997, as competitors began to eat away at Fleetwood's market share positions.

Fleetwood began the decade optimistic about the future, as evidenced by its 1990 $6.3 million purchase of a 75-acre parcel in southern California that it planned to develop as a site-built housing tract. This would have been the company's first foray into nonmanufactured housing, but after several years of preliminary work on the project, it decided in 1996 not to pursue the project. By that time the land was worth only $2.8 million, thanks to the collapse of the California real estate market.

Another attempt at expansion failed as well, when the company looked for growth outside the maturing U.S. motor home market. In September 1992 Fleetwood acquired an 80 percent interest in Niesmann & Bischoff, a Koblenz, Germany-based manufacturer of luxury-priced ($150,000 to $300,000) motor homes under the brands Clou Liner and Clou Trend. Continued weakness in the German economy, however, led to slow sales following the purchase, even after Fleetwood introduced lower-priced models. In May 1996 Fleetwood gave up on its European adventure, selling its stake in Niesmann & Bischoff and taking a $28 million charge for fiscal 1996 in the process.

May 1996 also saw another divestment, and a further focusing in on core operations, through the sale of Fleetwood Credit to Associates First Capital Corporation for $156.6 million, resulting in an after-tax gain of $33.9 million for fiscal 1997. In conjunction with the sale, Fleetwood and Associates First Capital signed a long-term operating agreement that assured financing continuity.

These divestments came at a time when Fleetwood needed to devote more attention to its domestic manufactured housing and RV units, both of which were losing ground to aggressive competitors. The company's share of the manufactured housing market reached a peak of 21.6 percent in 1994, then declined to 20.1 percent in 1995 and to 18.5 percent in 1996. On the rise was Auburn Hills, Michigan-based Champion Enterprises Inc., which had grown rapidly in the mid-1990s through acquisitions, was undercutting Fleetwood's prices, and had attained 16.5 percent of the market by 1996. In the RV sector, Fleetwood's share of the motor home market, the most lucrative RV niche, fell from 34 percent in 1992 to 27.5 percent in 1996. Winnebago remained a fairly distant second at 16.7 percent, but Winnebago and other competitors had gained edges over Fleetwood by introducing popular space-increasing slideouts to their motor homes well before Fleetwood added them in fiscal 1996.

Like many an industry leader, Fleetwood had seemed to take its longstanding top positions for granted. The company began in 1996 and 1997 to become more customer-focused, for example by realigning its manufactured housing operations into three autonomous regional units, which brought decision-making closer to the customer level. Fiscal 1997 saw the establishment of 49 Fleetwood Home Centers, which were retail centers selling only Fleetwood homes and designed to offer improved customer service. In October 1997 the company entered into a joint venture (49 percent owned by Fleetwood) with Bloomfield Hills, Michigan-based Pulte Corp. to form Expression Homes, a venture intended to establish a nationwide network of retail centers where manufactured homes would be sold and home financing and insurance would be offered. It intended to grow through acquisitions, including the purchase of some of Fleetwood's independent agents. Fleetwood saw Expression Homes as a way that its homes could be marketed in a more consistent and cohesive way. The question for Fleetwood was whether moves such as these would be enough for it to remain the number one maker of manufactured homes and RVs in the 21st century.